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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The difference between total revenue and total explicit costs






2. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






3. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






4. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






5. Models where firms are competitive rivals seeking to gain at the expense of their rivals






6. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






7. Ed < 1






8. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






9. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






10. Models where firms agree to mutually improve their situation






11. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






12. Exists at the point where the quantity supplied equals the quantity demanded






13. AVC = TVC/Q






14. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






15. Ed = 0 - no response to price change






16. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






17. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






18. The rational decision maker chooses an action if MB = MC






19. Ei = (%dQd good X)/(%d Income)






20. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






21. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






22. The change in quantity demanded resulting from a change in the price of one good relative to other goods






23. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






24. Entry (or exit) of firms does not shift the cost curves of firms in the industry






25. Entry of new firms shifts the cost curves for all firms downward






26. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






27. The difference between total revenue and total explicit and implicit costs






28. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






29. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






30. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






31. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






32. The total quantity - or total output of a good produced at each quantity of labor employed






33. Ed > 1 - meaning consumers are price sensitive






34. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






35. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






36. The sum of consumer surplus and producer surplus






37. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






38. A good for which higher income increases demand






39. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






40. Ed = 8 - infinite change in demand to price change






41. TR = P * Qd






42. A firm that has market power in the factor market (a wage-setter)






43. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






44. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






45. Occurs when LRAC is constant over a variety of plant sizes






46. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






47. The price of a good measured in units of currency






48. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






49. ATC = TC/Q = AFC + AVC






50. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic